**Guide for Accounting and Reporting of**

**Exchange Stabilization Fund (ESF) Fair Market Value for**

**Foreign Currency and Investments**

Effective Date Fiscal Year 2014

Prepared BY: Marilyn Evans

Department of Treasury

***Introduction***

ESF now holds certain foreign currency securities at fair value.  In October of 2008, ESF deemed that its Other Foreign Currency Denominated Assets and Long Term Investments should be classified from Held-To-Maturity to Available-For-Sale Securities.  As a result of the change in classification of securities, ESF had to conform to the FASB standard FAS 157 (effective November 2007), which provided that Available-For-Sale securities must be carried at fair value.  ESF is providing the following scenario in order to comply with the adopted GAAP/FASB principles and standards.

The Special Drawing Rights Act of 1968 (P.L. 90-349) provides that SDRs allocated by the International Monetary Fund (IMF) or otherwise acquired by the United States (U.S.) are resources of the Treasury's Exchange Stabilization Fund (ESF).  SDRs are reserve assets allocated to participating members of the IMF to meet a global need to supplement existing reserve assets.  SDRs derive their quality as reserve assets from the undertakings of the members to accept them in exchange for "freely useable" currencies (The U.S. dollar, European Euro, Japanese Yen, and U.K. sterling).  U.S. Government holdings in SDRs were obtained from IMF allocations issued between 1970-1981 and through the net of SDR acquisitions and sales.  SDR Holdings are shown as an asset item in the ESF financial records and SDR Allocations are shown as a liability item.

***Proposed New SGL Accounts***

**Account Title:** Funds Not Available – Adjustments to the Exchange Stabilization Fund

**Account Number**: 463500

**Normal Balance:** Credit

**Definition:**  Funds not available for commitment/obligations.  The amount of increase or descrease in the Exchange Stabilization Fund as a result of revaluation, foreign exchange rate adjustments, and special liabilities (general allocations and special drawing rights certificates).  Although the normal balance in this account is a credit, it is acceptable in certain instances for this account to have a debit balance when a loss is recognized.  This USSGL account is to be used only by the Department of the Treasury.  This account does not close at year-end.   

**Justification:**  This account was created as it does not close where 463000 does close.

**Listing of USSGL accounts Used in this scenario**:

**USSGL Budgetary Account Reporting:**

**DRAFT USSGL Proprietary and Budgetary Account Attribute Table**

**Beginning Balance Trial Balance FY 2014**

Foreign Investments

1. To record the moving of investments from 162000 to 167000.  (TC D600)

2. To record the moving of discounts on investments from 162100 to 167100. (TC D600) 

3.  To record the moving of premiums on investments from 162200 to 167200. (TC D600) 

4.  To record the moving of previous foreign exchange rate adjustments from 167000 to 167900. (TC D601) 

5.  To record the moving of previous foreign exchange rate adjustment from 120000 to 167900 for FIXBIS (Fixed rate investment with the Bank of International Settlement) securities. (TC D603) 

6.  To record the moving of foreign currency equivalents excluding the FIXBIS securities from 120000 to 120500. (TC D600) 

7.  To record the moving of FIXBIS securities from 120000 to 167000. (TC D600) 

8.  To record fair value adjustments of investments (unrealized gain). (TC D592 - Mod)  **(224 Subclass XX USSGL 167900 RT7 973, GTAS INVNONFEDSEC, and Subclass 04 USSGL 718100)**

9.  To record fair value of investments (unrealized loss). (TC D594 - Mod)  **(224 Subclass XXUSSGL 167900 RT7 973, GTAS INVNONFEDSEC, and Subclass 04 USSGL 728100)**

10a.  To record  maturity (to be reinvested immediately) of non-federal securities (long-term bonds)  sold at a PAR and receive coupon.  (TC C127 - Mod)  **(224 Subclass 41, USSGL 120900, FACTS II RT7 921, GTAS FHOT, and 224 subclass XX, USSGL 167000, FACTS II RT7 973, GTAS INVNONFEDSEC, and Subclass 08, USSGL 134200).**

10b.  To record realized gain due to foreign exchange rate changes between purchase and maturity (to be reinvested immediately) of non-Federal securities (long-term bonds).  (TC D575 - Mod)  **(224 Subclass XX, USSGL 167900, FACTS II RT7 973, GTAS INVNONFEDSEC, and 224 subclass 4, USSGL 719000)**

10c.  To record realized loss due to foreign exchange rate changes between purchase and maturity (to be reinvested immediately) of non-Federal securities (long-term bonds).  (TC D573 - Mod)  **(224 Subclass XX, USSGL 167900, FACTS II RT7 973, GTAS INVNONFEDSEC, and 224 subclass 4, USSGL 729000)**

11a.  To record purchase of non-federal securities (long-term bonds) at premium/discount. (TC B153)  **(224 Subclass XX, USSGLs 167000, 167100, 167200, FACTS II RT7 973, GTAS INVNONFEDSEC, and Subclass 41, USSGL 120900, FACTS II RT7 921, GTAS FHOT, and Subclass 08, USSGL 134200, 531100)**

11b.  To record sale of non-federal securities (long-term bonds) at premium. (TC C600- Mod)  **(224 Subclass XX, USSGLs 167000, 167200, FACTS II RT7 973, GTAS INVNONFEDSEC, and Subclass 41, USSGL 120900, FACTS II RT7 921, GTAS FHOT, and Subclass 08, USSGL 134200)**

11c.  To record sale of non-federal securities (long-term bonds) at discount. (TC C601 - Mod)  **(224 Subclass XX, USSGLs 167000, 167100, FACTS II RT7 973, GTAS INVNONFEDSEC, and Subclass 41, USSGL 120900, FACTS II RT7 921, GTAS FHOT, and Subclass 08, USSGL 134200)**

11d.  To record realized gain due to foreign exchange rate changes between purchase and sale (to be reinvested immediately) of non-Federal securities (long-term bonds).  (TC D575 - Mod)  **(224 Subclass XX, USSGL 167900, FACTS II RT7 973, GTAS INVNONFEDSEC and 224 subclass 4, USSGL 719000)**

11e.  To record realized loss due to foreign exchange rate changes between purchase and sale (to be reinvested immediately) of non-Federal securities (long-term bonds).  (TC D573 - Mod)  **(224 Subclass XX, USSGL 167900, FACTS II RT7 973, GTAS INVNONFEDSEC, and 224 subclass 4, USSGL 729000)**

12a.  To record accrual of interest receivable (monthly) on non-federal securities (long-term bonds) at PAR.  Euro bonds receive revenue once a year.  Japan Bonds receive revenue twice a year.  (TC C418)  **(224 Subclass 08, USSGLs 134200, 531100)**

12b.  To record accrual of interest receivable (monthly) on non-federal securities (long-term bonds) with a bond premium.  Euro bonds receive revenue once a year.  Japan Bonds receive revenue twice a year.  (TC C419 - Mod)  **(224 Subclass 08, USSGLs 134200, 531100; Subclass XX, USSGLs 167200, RT7 973, GTAS INVNONFEDSEC)**

12c.  To record accrual of interest receivable (monthly) on non-federal securities (long-term bonds) with a bond discount.  Euro bonds receive revenue once a year.  Japan Bonds receive revenue twice a year.  (TC C423 - Mod)  **(224 Subclass 08, USSGLs 134200, 531100; Subclass XX, USSGLs 1671, RT7 973, GTAS INVNONFEDSEC)**

12d.  To record coupon payment on non-federal securities (long-term bonds).  Euro bonds receive revenue once a year.  Japan Bonds receive revenue twice a year.  (TC C113 - Mod)  **(224 Subclass 08, USSGLs 134200; Subclass 41, USSGL 120900, RT7 921, GTAS FHOT)**

13a.  To record maturity and reversing interest accrual for cash equivalents. (TC C126 - Mod)  **(224 Subclass 41, USSGLs 120500 and 120900, FACTS II RT7 921, GTAS FHOT, and Subclass 08, USSGL 138400)**

13b.  To record purchase of cash equivalents. (TC B144)  **(224 Subclass 41, USSGLs 120500 and 120900, FACTS II RT7 921, GTAS FHOT, and Subclass 08, USSGLs 138400 and 531100)**

13c.  To record daily accrual of interest receivable for cash equivalents. (TC C420)  **(224 Subclass 08, USSGLs 138400 and 531100)**

13d.  To record capitalization of interest on Euro and Yen 2-day notices (these are part of the cash equivalents portfolio). (TC C157- Mod)  **(224 Subclass 41, USSGL 120500, RT7 921, GTAS FHOT; Subclass 08, USSGLs 138400)**

13e.  To record interest payments for Bank of France (BOF) Time Deposits , Duetsche Bundesbank (DBB) Time Deposit, Yen Overnight Deposits, and Reverse Repurchase Agreements (Repos) (these are part of the cash equivalents portfolio). (TC C115)  **(224 Subclass 41, USSGL 120500, RT7 921, GTAS FHOT; Subclass 08, USSGLs 138400)**

13f.  To record foreign exchange rate realized gain on cash equivalents. (TC D575 - Mod)  **(224 Subclass 41, USSGL 120500, RT7 921, GTAS FHOT; Subclass 04, USSGLs 719000)**

13g.  To record foreign exchange rate realized loss on cash equivalents. (TC D576 - Mod)  **(224 Subclass 41, USSGL 120500, RT7 921, GTAS FHOT; Subclass 04, USSGLs 729000)**

14a.  To record purchase of  FIXBIS (greater than 6 months but less than a year – classified as non-federal securities). (TC B153)  **(224 Subclass 41, USSGL 120900, FACTS II RT7 921, GTAS FHOT; Subclass XX, USSGL 167000, RT7 973, GTAS INVNONFEDSEC; and Subclass 08, USSGLs 134200 and 531100)**

14b.  To record daily accrual of interest receivable for FIXBIS. (TC C418)  **(224 Subclass 08, USSGLs 134200 and 531100)**

14c.  To record interest payments for FIXBIS. (TC C113- Mod)  **(224 Subclass XX, USSGL 167000, RT7 973, GTAS INVNONFEDSEC; Subclass 08, USSGLs 134200)**

14d.  To record maturity and reversing interest accrual for FIXBIS (greater than 6 months but less than a year – classified as non-federal securities). (TC C126- Mod)  **(224 Subclass XX, USSGLs 167000, FACTS II RT7 973, GTAS INVNONFEDSEC; Subclass 41, USSGL 120900, FACTS II RT7 921, GTAS FHOT; and Subclass 08, USSGL 134200)**

15.  To record a foreign currency rate intervention. (TC B146)  **(224 Subclass 41, USSGL 120500, FACTS II RT7 921, GTAS FHOT, and Subclass 88, USSGL 161000, FACTS II RT7 971, GTAS INVUSTREASSEC)**

Special Drawing Rights (SDRs)

16.  To record monetization in SDR certificates.  (TC D591)  (Reverse for demonetization) **(224 subclass USSGL 219200 and Subclass 88, USSGL 161000, FACTS II RT7 971, GTAS INVUSTREASSEC)**

17.  To record allocations on SDR.  (TC D595)  **(224 Subclass 01, USSGL 119400, FACTS II RT7 965, GTAS HOLDSDR, and Subclass 03, USSGL 219300)**

18.  To record the IMF requested SDR purchase to assist a country that has a need for convertible currency.  (TC B141  **(224 Subclass 01, USSGL 119400, FACTS II RT7 965, GTAS HOLDSDR, and Subclass 98, USSGL 161000, FACTS II RT7 971, GTAS INVUSTREASSEC)**

19.  To record the receipt of remuneration.  (TC C119 - Mod)  **(224 Subclass 01USSGL 119400, FACTS II RT7 965, GTAS HOLDSDR; Subclass 08 USSGLs 579000, 211000, 576000)  NOTE:  Going forward IMF will have to provide a breakout for the remuneration as the part from the old quota the payment will go to the miscellaneous account (020 1463.1).  For the portion under credit reform, payment will go to the financing account (011X4383).**

20.  To record payment of remuneration. (TC B210 - Mod)  (SGL 633800 used as there is no 4901 e-b or 4902 to reconcile budget expenditures to expenses – either new SGL or a valid exception need to look GTAS) **(224 Subclass 88 USSGL 161000, FACTS II RT7 971, GTAS INVUSTREASSEC; Subclass 08 USSGLs 211000, 633800)**

21.  To record an IMF Quota increase as a result of a new agreement for SDRs. (TC D602)  **(224 Subclass 01, USSGL 119400, FACTS II RT7 965, GTAS HOLDSDR, and Subclass 88, USSGL 161000, FACTS II RT7 971, GTAS INVUSTREASSEC; ESF will also report on the 224 the IMF portion to 11X4383)**

22.  To record the revaluation to US dollar for SDR Holdings, which is a form of currency, (change in SDR monthly rates) realized gains. (TC D604 - Mod)  **(224 Subclass 01, USSGL 119400, FACTS II RT7 965, GTAS HOLDSDR, and Subclass 04, USSGL 719000)**

23.  To record the revaluation to U.S. dollars for SDR Holdings, which is a form of currency,  (change in SDR monthly rates) realized losses. (TC D606- Mod)  **(224 Subclass 01, USSGL 119400, FACTS II RT7 965, GTAS HOLDSDR, and Subclass 04, USSGL 729000)**

24.  To record the revaluation to U.S. dollars for SDR allocations, which is a form of currency, (change in SDR monthly rates) realized losses. (TC D608 - Mod)  **(224 Subclass 03, USSGL 219300 and Subclass 04, USSGL 729000) NOTE:  Entry 21 and 23 go hand in hand.**

25.  To record the revaluation to U.S. dollars for SDR allocations, which is a form of currency, (change in SDR monthly rates) realized gains. (TC D610 - Mod)  **(224 Subclass 03, USSGL 219300 and Subclass 04, USSGL 719000)  Note:  Entry 22 and 24 go hand in hand.**

26.  To record SDR interest (holdings) and charges (allocations) accrual with a net effect of a unrealized gain (month end with a true up on the quarter see transaction XX).    (TC D612 - Mod)  **(Subclass 08, USSGL 134400, 214000, 531100, 633000, 719100, net effect is zero)**

27.  To record SDR interest (Holdings) and charges (allocations) accrual with a net effect of a unrealized loss (month end with a true up on the quarter see transaction 28).  (TC D614 - Mod)  **(Subclass 08, USSGL 134400, 214000, 531100, 633000, 729100 net effect is zero)**

28.  To record SDR interest and charges accrual true up on the quarter (goes with transactions 26 and 27).  (TC D616 - Mod)  **(224 Subclass 01, USSGL 119400, RT7 965, GTAS HOLDSDR; and Subclass 08, USSGL 134400 and 214000)**

29.  To record the IMF Annual SDR Assessment accrual.  (TC B444 - Mod)  **(224 Subclass 08 USSGLs 610000 and 211000 net effect is zero)**

30.  To record the IMF Annual Assessment.  (TC B446 - Mod)  **(224 Subclass 01 USSGL 119400, RT7 965, GTAS HOLDSDR; and Subclass 08, USSGLs 610000, 679000 and 211000)**

U.S. Government Securities

31.  To record redemption, investment and interest with the Bureau of the Fiscal Service recorded monthly.  (TC C784 - Mod) **(224 Subclass 88/98 for USSGL 161000, RT7 971, GTAS INVUSTREASSEC, and subclass 08 for USSGL 531100)**

32.  To record issuance of a bridge loan **posting is showing what was done in FY 2002 pending research for MTS and USSGL Division**(TC C431) (**224 Subclass 98 for USSGL 161000, RT7 971, GTAS INVUSTREASSEC)**

33.  To record the payback of a bridge loan **posting is showing what was done in FY 2002 pending research for MTS and USSGL Division**(TC C148 - Mod) (**224 Subclass 88 for USSGL 161000, RT7 971; 224 Subclass 8 for USSGL 531200)**

Pre-Closing Entries

34.  To record the sweeping of General Fund receipt accounts (**TAS 201435**) associated with the fund balance at yearend. (TC F124)

35.  To record the sweeping of General Fund receipt accounts (**TAS 201463.1**) associated with the fund balance at yearend. (TC F124)

**224/RT7/USSGL Matrix for ESF**

Monthly Treasury Statement (MTS)

Table 5.  Outlays of the U.S. Government, October 2013 and Other Periods

($ millions)

Table 6.  Means of Financing the Deficit or Disposition of Surplus by the U.S. Government, October 2013 and Other Periods 

($ millions)

Table 6.  Schedule D-Investments of Federal Government Accounts in Federal Securities, October 2013 and Other Periods

($ millions)

Table 6.  Schedule E-Net Activity, Guaranteed and Direct Loan Financing, October 2013 and Other Periods

($ millions)

**Pre-Closing Trial Balance FY 2014**

Closing Entries

36.  To record the consolidation of actual net-funded resources and reductions for withdrawn funds (TC F302).

37.  To record the closing of revenue, expenses and gains (TC F336).

38.  To record the closing of revenue, expenses and gains (TC F336)..

39.  To record the closing of revenue, expenses and gains (TC F336)..

**Closing Trial Balance FY 2014**

Control Checks 

Accounts Payable

Funds Not Available for Commitment/Obligation

Other Actual Collections Non-Federal (Ending minus Beginning for Asset and Liability, Current Year for Revenue and Expense)

**Balance Sheet**

****As of September 30, 2014

**Statement of Net Cost**

         For the year ended September 30, 2014

**Statement of Changes in Net Position**

         For the year ended September 30, 2014

**Statement of Budgetary Resources**

         For the year ended September 30, 2014

FMS 2108:  Yearend Closing Statement

For the year ended September 30, 2014

CALC (5 + 6 +7 +8 – 9 – 10)

**SF 133 Report on Budget Execution and Budgetary Resources and Schedule P: Program and Financing  (P&F)**

**Reclassified Balance Sheet for the Closing Package (based on FY 2011 crosswalks)**

         As of September 30, 2014

**Reclassified Statement of Net Cost for the Closing Package**

         For year ended September 30, 2014

**Reclassified Statement of Changes in Net Position for the Closing Package**

         For year ended September 30, 2014

� A coupon payment on a � HYPERLINK "http://en.wikipedia.org/wiki/Bond_(finance)" \o "Bond (finance)" �bond� is a periodic interest payment that the bondholder receives during the time between when the bond is issued and when it matures.

� Currency intervention, also known as exchange rate intervention or foreign exchange market intervention, is the purchase or sale of currency on the exchange market by the � HYPERLINK "http://en.wikipedia.org/wiki/Monetary_authority" \o "Monetary authority" �monetary authority�, i.e. the central bank, in order to influence the value of the home currency on the � HYPERLINK "http://en.wikipedia.org/wiki/Foreign_exchange_market" \o "Foreign exchange market" �foreign exchange market�.

� Under the Special Drawing Rights Act of 1968 (P.L. 90-349), the Secretary of the Treasury is authorized to issue SDR certificates to the Federal Reserve against ESF’s SDR holdings.  The transaction is for the purpose of financing the purchase of SDRs or for other ESF operations, such as unusually large transactions (i.e. swaps or foreign currency purchases).  The SDR certificates bear no interest.  Demonetization occurs when SDR certificates are partially or completely redeemed by ESF.  This occurs when the dollar amount of the SDR certificates outstanding is in danger of exceeding the dollar equivalent of SDR holdings due to currency market fluctuations and/or SDR sales.  In addition, pursuant to understandings with the Federal Reserve, SDR certificates will be redeemed when ESF’s U.S. Government securities holdings appear to be in excess of foreseeable requirements.

� The United States will receive an allocation of SDRs.  The effect on the ESF balance sheet will be an increase in the ESF's SDR holdings on the asset side of the balance sheet and a corresponding increase in the SDR allocations item on the liability side of the ESF balance sheet.  To mobilize the increase in the ESF's SDR holdings for the purpose of providing financial resources in the form of dollars to other IMF member countries.

� The IMF pays remuneration (in effect, interest) on a member’s reserve position in the IMF, except on a small portion that is provided to the IMF as an interest‐free resource. The amount of a member’s reserves held by the IMF can change frequently during the year. It increases when the IMF calls on the member to contribute some of its currency to lend to other members, and decreases when borrowing members make repayments to the IMF that are then returned to the member. These payments are usually prescribed in advance in the IMF’s financial transaction plan.  Treasury's policy since 1992 has been to receive remuneration in SDRs.  SDRs received become the resources of ESF, as required under 22 USCS 286o, and ESF pays the dollar equivalent to the Treasury General Account (TGA).  The ESF's receipt of the SDRs and payment of the dollar equivalent to the TGA are not simultaneous.  This is due to a time lag in IMF reporting of the SDR transfer and higher priority demands at IM. Therefore, the ESF must also reimburse the TGA the interest it earned on those dollars (based on the PDSI rate of return) during the period, which elapsed between the receipt of the SDRs and the dollar payment to the TGA. When the International Monetary Fund (IMF) remuneration plus accrued interest is paid to Treasury General Account (TGA), the ESF Accountant will receive a copy of the final memorandum from International Monetary and Financial Policy (IM) requesting redemption of U.S. government securities for the amount of the payment, an instruction memo, a transaction ticket from IM giving the specifics of the transaction, and a BPD transaction confirmation. The Accountant prepares a “Voucher And Schedule of Withdrawals and Credits” (SF-1081) to record the transfer of funds from the ESF to the TGA for the SDRs and accrued interest payable.  The SF-1081 is compared to the memo prepared by IM, the IMF remuneration telex and the BPD confirmation for accuracy. A copy of the SF-1081 is sent to FMS.

� Currency intervention, also known as exchange rate intervention or foreign exchange market intervention, is the purchase or sale of currency on the exchange market by the � HYPERLINK "http://en.wikipedia.org/wiki/Monetary_authority" \o "Monetary authority" �monetary authority�, i.e. the central bank, in order to influence the value of the home currency on the � HYPERLINK "http://en.wikipedia.org/wiki/Foreign_exchange_market" \o "Foreign exchange market" �foreign exchange market�.

� SDR Holdings and Allocations are not available-for-sale securities.  Therefore, under US GAAP, do not need to be classified with the distinction of realized/unrealized gains or losses.

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